What is a sustainable investment?
How can the aspect of sustainability in the investment be taken into account? Several levels can be distinguished here, whereby the scales can also be created quite differently within each of these variants. Thus, exclusion criteria (1), if strictly worded, can be more effective than just vaguely expressed standards (2):
Level: Exclusion criteria for black sheep, businesses and industries that attract attention through highly polluting or inhuman products, production methods or business practices.
The z. These include: production of armaments or at least outlawed weapon types, alcohol and tobacco, nuclear energy, gambling, pornography, advocacy for the privatization of water, use of child labor.
Level: Establishing ethical, social and environmentally sustainable minimum standards. These standards may be absolutely worded or relative to competitors, as in the best-in-class approach, which selects companies that achieve the best sustainability values within their industry.
These standards only become effective if they are not formulated as a vague declaration of intent, but act as a hard exclusion criterion for an investment. Internationally established is the ESG (Environment, Social, Governance) approach, which is part of United Nations Principles for Responsible Investment (UN-PRI).
The goal is to make these standards the benchmark for future corporate and investment decisions. In companies, they should not be perceived as a foreign body, which must be processed point by point, but already integrated into the decision-making processes.
On the investor side, this can be achieved through the inclusion of social and environmental risks in ratings, which one would have to convince the big rating agencies. The moral aspects, such as the ESG approach, do not replace the classic value valuation of a security, but complement it.
It’s not about investing in low-yielding securities or lacking certainty to do something good. It’s about selecting those within the top papers that are ethically acceptable, if not particularly valuable. In this way, if you will, kill two birds with one stone: you do something good and you also earn money!